Gulf News- Man Global Strategies (MGS) manages over $17 billion in a range of portfolios that invest in hedge funds but, as its CEO Alex Lowe explains, this is no ordinary fund of hedge fundsbusiness.
“Funds of hedge funds tend to invest in a large number of managers,” says Lowe. “This spreads their risk but also dilutes returns, allowing them to offer stable if unexciting performance.”
“At MGS, we use a different approach, taking concentrated positions in high confidence managers and then actively managing allocations to optimise performance. Even in our most diversified products, which have close to 100 managers, the bulk of the assets are allocated to fewer than 30 hedge funds.”
This strategy allows MGS to target higher returns than traditional funds of hedge funds, but it also requires a fundamentally different investment approach.
Hedge funds generally impose relatively strict terms on their investors. These include monthly or quarterly trading dates, redemption penalties and capacity limits – a fund can usually only trade a finite amount of money, known as its ‘capacity’, according to the type of strategy it employs. It therefore sets limits on the amount of money it is prepared to trade on behalf of a single investor. Hedge funds also tend to be skittish about providing details of their trading strategy for fear it may be duplicated by rivals.
